sure dividend€¦ · february 2016 edition by ben reynolds . 2 table of contents ... innovations...

Sure Dividend

HIGH QUALITY DIVIDEND STOCKS, LONG-TERM PLAN

February 2016 Edition

By Ben Reynolds

2

Table of Contents

Opening Thoughts -Declining Oil & Sell Recommendations- .................................................. 3

The Top 10 List – February 2016 ................................................................................................ 4

Analysis of Top 10 Stocks ............................................................................................................. 5

Archer-Daniels-Midland (ADM) ................................................................................................ 5

Johnson Controls (JCI) ............................................................................................................... 7

Cummins (CMI) .......................................................................................................................... 9

United Technologies (UTX) ..................................................................................................... 11

Abbott Laboratories (ABT) ....................................................................................................... 13

Deere & Company (DE) ........................................................................................................... 15

Becton, Dickinson & Company (BDX) .................................................................................... 17

Wal-Mart (WMT) ..................................................................................................................... 19

Verizon (VZ) ............................................................................................................................. 21

W.W. Grainger .......................................................................................................................... 23

Analysis of International Stocks ................................................................................................ 25

List of Stocks by Sector .............................................................................................................. 26

List of Stocks by Rank ................................................................................................................ 29

Portfolio Building Guide ............................................................................................................ 32

Examples ................................................................................................................................... 32

List of Past Recommendations ................................................................................................... 33

Closing Thoughts ........................................................................................................................ 34

3

Opening Thoughts -Declining Oil & Sell Recommendations-

The S&P 500 has declined 7.8% so far in 2016. Declining oil prices brought about by

a supply glut are partially responsible for lower economic activity which is causing

market declines.

The idea that oil production would peak in 2005 is now laughable. The problem with

‘Peak Oil’ and most other Malthusian predictions is they do not take into account

human ingenuity. Rising oil prices (what happens when oil is scarce) creates a greater

incentive for people to find oil. Over time this results in new technologies – like

hydraulic fracturing – that have stimulated supply.

Will oil prices rise again? Yes. Oil demand will rise – in part due to low oil prices

themselves – while supply will shrink as corporations cease production on

unprofitable oil sources. It’s impossible to know when oil prices will rise, but it will

occur at some point.

That brings us to sell recommendations. Before this month, there has only been 1

Sure Dividend sell recommendation (Chubb because it was acquired). This month

there are 2 sell recommendations:

Sell #1 – Baxalta (BXLT) Baxalta is being acquired by Shire Plc. As a result, the company is no longer a

dividend growth stock; it is now a merger arbitrage play. Baxalta should be sold

when markets open next week. The stock was first recommended in the newsletter in

July of 2015 at $31.77 per share. The stock is currently trading for $37.98 per share

for a 20% gain (including dividends). For comparison the S&P 500 had total returns

of -8% over the same time period.

Sell #2 – ConocoPhillips (COP) ConocoPhillips recently cut its quarterly dividend from $0.74 to $0.25 per share. As a

result, it no longer has the dividend history required to be a Sure Dividend stock.

However, the stock should not be sold immediately. Most companies cut dividends

because they are in decline. ConocoPhillips decline is temporary in nature and a

result of low oil prices not of a permanent business decline. The company should be

sold after oil prices recover, not before. I will be watching the stock and recommend

a sale price in this newsletter at a later date.

4

The Top 10 List – February 2016

Ticker Name Score Months Yield Payout Growth Beta Volatility

ADM Archer-Daniels-Midla. 1.00 2 3.1% 38% 10.0% 1.0 34%

JCI Johnson Controls 0.98 2 2.9% 34% 10.3% 1.3 36%

CMI Cummins 0.98 4 4.4% 41% 14.0% 1.6 44%

UTX United Technologies 0.96 7 2.7% 38% 8.5% 1.0 24%

ABT Abbott Laboratories 0.96 6 2.3% 46% 10.0% 0.5 20%

DE Deere & Co. 0.95 14 3.1% 42% 13.3% 1.2 35%

BDX BDX 0.94 1 2.0% 35% 10.0% 0.6 20%

WMT Wal-Mart 0.94 23 3.2% 41% 6.0% 0.5 19%

VZ Verizon Wireless 0.92 3 4.9% 59% 6.0% 0.7 22%

GWW W.W. Grainger 0.92 8 2.3% 38% 12.5% 0.9 26%

Notes: The ‘Score’ column shows how close the composite rankings are between the

top 10. The highest ranked stock will always have a score of 1. The closer the score

is to 1, the better. Stocks are ranked using the criteria in The 8 Rules of Dividend

Investing. The ‘Months’ column shows the number of consecutive months a stock has

been in the Top 10.

General Mills was replaced by BDX this month. No other companies were added or

removed from the Top 10 this month. Changes in the top 10 occur with new financial

news and stock price changes. The stability of the top 10 list shows the ranking

method is consistent, not based on rapid swings.

An equally weighted portfolio of the top 10 has the following characteristics:

Top 10 S&P500

Dividend Yield: 3.1% 2.3%

Payout Ratio: 42.0% 47.8%

Growth Rate: 10.1% 7.4%

PE Ratio: 14.0 20.7

5

Analysis of Top 10 Stocks

Archer-Daniels-Midland (ADM)

Overview & Current Events

ADM was founded in 1902 and now employs over 33,000 people in 140 countries.

ADM realized adjusted earnings-per-share of $0.61 in its most recent quarter (2/2/16) versus $1.00 in

the same quarter a year ago. ADM’s business is cyclical and is currently in a downturn. The

company’s dividend is very safe despite the downturn. Management announced a ~7% dividend

increase, bringing the company’s quarterly dividend to $0.30/share for a payout ratio of ~50%.

Next Dividend Record Date: February 16th, 2016 Next Earnings Release: Mid April 2016

Competitive Advantage & Recession Performance

ADM’s competitive advantage comes from its excellent global distribution network. The company

owns the following: 283 processing plants, 413 procurement facilities, ~250 warehouses, and many

rail cars, trucks, and ocean vessels for transportation. It would take an enormous upfront capital

investment for a competitor to come close to matching the scale and distribution network of ADM.

ADM is not subject to normal economic cycles. Grains still need to be processed and transported, even

during recessions. The company’s results are correlated with grain and oil prices; not with overall

economic activity. As a result, ADM tends to do well during recessions. The company saw earnings-

per-share rise each year through the Great Recession as demand for ethanol increased.

Growth Prospects, Valuation, & Catalyst

ADM has compounded EPS at 13.6% a year from 1999 through 2015. Investors should expect total

returns of 10.5% to 13.5% a year from the stock’s 3.5% dividend yield and expected EPS growth of 7%

to 10% a year. The long-term growth driver for ADM is increased food consumption from growing

global populations. ADM’s management is shedding low margin businesses and acquiring higher

margin businesses. Recent acquisitions include: WILD Flavors (flavorings and additives) and Harvest

Innovations (Non-GMO, organic, and gluten-free ingredients).

ADM’s cyclical downturn has made the stock a bargain. ADM is currently trading for an adjusted P/E

ratio of 11.4. ADM’s historical median P/E ratio over the last decade is around 13.5. Earnings are

depressed at $2.98/share. EPS under normal economic conditions would be ~$3.50. Using ‘normal’

EPS of $3.50 and the company’s median average P/E ratio of 13.5 implies a fair value of ~$47/share.

The company is currently trading at ~$34 per share, a 28% discount to fair value.

Maximum Drawdown (starting in year 2000): -68% in October of 2008

DRIP Available: Yes, with fees

Dividend Yield: 3.5%

10 Year EPS Growth Rate: 4.5% per year (low due to current downturn)

10 Year Dividend Growth Rate: 11.2% per year

Most Recent Dividend Increase: 7.1%

Dividend History: 41 consecutive years of dividend increases

7

Johnson Controls (JCI)


Johnson Controls manufactures car interiors and components, building control systems and power

solutions, and battery systems. The company was founded in 1885. Today, Johnson Controls has the

following automotive market shares by region: China – 44%, North & South America – 36%, Europe

– 38%, SE Asia, Japan, Korea – 13%.

Johnson Controls continues to post excellent results (1/28/16). The company saw adjusted EPS

increase 11% in its most recent quarter due to revenue growth, rising margins, and share repurchases.

Next Dividend Record Date: March 11th, 2016 Next Earnings Release: Late April, 2016


Johnson Controls’ history and size give it a competitive advantage in the automotive manufacturing

market. The company’s global reach and large market share in China make it difficult for new entrants

to compete with Johnson Controls.

Johnson Controls is not recession resistant. The company saw EPS plummet from $2.33 per share to

$0.47 per share during the Great Recession. Johnson Controls serves the automobile and construction

industries, both of which are highly sensitive to downturns in the global economy. The company’s low

payout ratio and commitment to steady or rising dividends helped the company to continue paying

dividends through the Great Recession, when other automotive companies eliminated dividends.


Johnson Controls is expecting 8% to 14% EPS growth in 2016. Over the long-run I expect EPS growth

of between 7% and 9%, in line with historical averages. This growth combined with the company’s

~3% dividend yield gives investors expected returns of 10% to 12% a year.

The company’s long-term growth driver is population growth in emerging markets – especially China.

Johnson Controls currently has 44% market share in the Chinese automotive market. Greater need for

energy storage due to variable solar and wind power generation will also provide favorable tailwinds

for the company’s power and battery solution systems.

Johnson Controls plans to spin-off its automotive business in October of 2016. The company recently

announced the name of this spin-off – Adient. The spin-off will allow Johnson Control’s two primary

business units to pursue independent strategies, which will benefit shareholders.

The company’s historical average P/E ratio is ~13.5. Johnson Controls is currently trading for a P/E

ratio of 10.2. Shares of the company are trading for $35.78; fair value is likely around $46 per share

for a 22% margin of safety.

Maximum Drawdown (starting in year 2000): -80% in March of 2009



10 Year EPS Growth Rate: 7.7% per year



Dividend History: 38 years without a reduction

9

Cummins (CMI)


Cummins is the world’s largest manufacturer of diesel engines. The company has 78% market share in

mid-duty (MD) diesel truck engines in North America, 34% in heavy-duty (HD) diesel truck engines in

North America, 42% MD & HD market share in truck diesel engines in India, and 17% MD & HD

market share in truck diesel engines in China.

Cummins full year 2015 (2/4/16) results showed adjusted earnings-per-share of $8.93, down from

$9.13 the previous year. The company is expecting further earnings-per-share declines of between 2%

and 10% in 2016 due to general weakness in the diesel engine industry brought about by the global

growth slow down and the strong United States dollar. While declines are never good, results are

better than what the market was expecting; Cummins stock rose 7.7% on the day of its earnings release.

Next Dividend Record Date: Mid February, 2016 Next Earnings Release: Late April, 2016


Cummins’ primary competitors are Navistar (NAV), Detroit Diesel, and Caterpillar (CAT). Navistar

has a market cap of just $1 billion (small versus Cummins $16 billion market cap). Detroit Diesel is a

private company, but is also much smaller than Cummins. Diesel engine manufacturing is not

Caterpillar’s primary business, unlike Cummins. As a result, Cummins has a well-deserved reputation

for designing and manufacturing better diesel engines than its competitors. The company has spent

over $2 billion in the last 3 years on research and development to support its diesel engine innovation.

Cummins’ Earnings-per-share fell about 40% during the Great Recession. Still, the company remains

profitable during recessions and its low payout ratio allows continued dividends through recessions.


Cummins grew earnings-per-share at 11.3% a year over the last decade. The company will likely

manage double-digit earnings-per-share growth over the long-run through further international

expansion, purchasing and consolidating its independent distributors, and share repurchases.

Cummins’ P/E ratio has averaged ~15 over the last 2 years. The company is currently trading for a P/E

ratio (using adjusted earnings) of just 11.1 – and earnings are depressed. When the company’s

operating environment improves and margins normalize, the company will have earnings-per-share of

~$10. I estimate fair value for Cummins stock at around $150. It is currently trading for $99.

Maximum Drawdown (starting in year 2000): -76% in November of 2008

DRIP Available: Yes, has fees and for current shareholders only



10 Year Dividend Growth Rate: 30.3%


Dividend History: 25 years without a reduction

11

United Technologies (UTX)


United Technologies is a large diversified manufacturer which owns the following: Otis elevators,

Carrier air conditioning, Kidde smoke alarms, Pratt & Whitney aircraft propulsion, and UTC

Aerospace Systems (aircraft components).

United Technologies saw constant currency adjusted earnings-per-share rise 1% in its most recent

quarter (1/27/16). Much of the manufacturing sector is slowing; United Technologies is no exception.

The company’s management is taking action. United Technologies is undertaking a $1.5 billion

restructuring plan that will go through 2018 and provide an estimated $900 million a year in savings.

Next Dividend Record Date: Mid February, 2016 Next Earnings Release: Late January, 2016


United Technologies’ competitive advantage comes from a mix of its size and scale combined with

lean manufacturing, technological know-how, and existing contracts and relationships with large

government customers.

United Technologies performed well through the Great Recession of 2007 to 2009. The company saw

earnings-per-share fall just 15.9% during the worst of the Great Recession. The company’s long-term

contracts with military and aerospace customers help to insulate it from recessions.


United Technologies has grown earnings-per-share at around 9% a year over the last decade. When the

global economy returns to normal, I expect the company to grow EPS at 8% to 11% per year.

United Technologies is expecting adjusted EPS growth of 0% to 5% in 2016. The company is

targeting $3 billion in share repurchases in 2016, approximately 4% of market cap. In addition, United

Technologies has a 3% dividend. Share repurchases, margin improvements, organic growth, and

dividends give investors an expected total return of 11% to 14% per year over the long run.

Over the last decade (excluding the Great Recession period), United Technologies P/E ratio has

averaged around 16. It is currently at 13.9. Fair value for the company’s stock is around $100. The

company’s stock is currently trading for ~$88 a share.

Maximum Drawdown (starting in year 2000): 52.7% in March of 2009






Dividend History: 46 consecutive years without a reduction

13

Abbott Laboratories (ABT)


Abbott Laboratories is a diversified health care company that manufactures and sells nutrition products,

medical devices, diagnostic equipment, and pharmaceuticals.

Abbott Laboratories recently announced (2/1/16) it will acquire Alere (ALR) for $5.8 billion. Abbott is

acquiring Alere at a P/E ratio of 29. The acquisition will bolster Abbott’s diagnostic equipment

division and make the company the global leader in point of care testing. Abbott is likely overpaying

somewhat for Alere, but the company expects the acquisition to be immediately accretive to EPS.

Abbott Laboratories full fiscal 2015 results (1/28/16) showed adjusted EPS of $2.15 for the full year,

growth of 8.6% versus the previous year. The company is expecting adjusted EPS of $2.10 to $2.20 in

fiscal 2016. Excluding issues in Venezuela from the company’s currency and negative currency effects

from the strong United States dollar, Abbott Laboratories is projecting 10% Adjusted EPS growth.

Next Dividend Record Date: Mid-April, 2016 Next Earnings Release: Mid-April, 2016


Abbott Laboratories has invested heavily in emerging markets. The company emphasizes

manufacturing its products in the same country in which the products are sold. This reduces currency

fluctuation risks and builds connections with communities, companies, and governments. The

company also owns many of the most trusted global brands in infant, child, and elderly nutrition.

Abbott Laboratories managed to grow revenue, earnings, and dividends each year through the Great

Recession of 2007 to 2009. Consumers and governments typically do not cut back on health care

expenditures regardless of the economic climate. Abbott Laboratories’ stock fell just 4.95% in 2008

while the S&P 500 declined 38%.


Abbott Laboratories generates 70% of its revenue in international markets. The company has large

operations in several key emerging markets. This international exposure gives Abbott excellent long-

term growth prospects as it benefits from faster emerging market growth and global aging populations.

The company stands to benefit from China’s lifting of the ‘one child policy’; this should boost formula

sales for Abbott Laboratories over the next several years.

Abbott Laboratories is trading at a P/E ratio of 17.4. The company is likely trading around the low end

of fair value given its strong competitive advantage, favorable growth prospects, and shareholder

friendly management.

Maximum Drawdown (starting in year 2000): -46% in July of 2002

DRIP Available: Yes, no fee but must already be a shareholder


10 Year EPS Growth Rate: N/A (due to ABBV spin-off)

10 Year Dividend Growth Rate: N/A (due to ABBV spin-off)



(excludes reductions from ABBV spin-off in 2012)

Note: Dividend yield history is skewed due to 2012 spin-off of AbbVie.

14

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Date 8/19/1997 8/19/1998 8/19/1999 8/17/2000 8/17/2001 8/23/2002 8/25/2003 8/25/2004 8/24/2005 8/24/2006 8/27/2007

Computer Services 12 Year Dividend Yield History

15

Deere & Company (DE)


Deere & Company is the world’s largest farming equipment manufacturer. The company has large

operations in the United States, Brazil, Russia, India, China, and Europe. Deere & Company operates

in 3 segments: Agriculture & Turf, Construction & Forestry, and Financial Services.

Deere & Company released its fiscal 2015 results on November 25th. The company saw earnings-per-

share decline 33% on the year. The company has done well reducing costs to increase profits during

the current down cycle in agricultural prices. Growth slowdowns in emerging markets have also

affected the company’s profitability. Total earnings were $1.9 billion in 2015. 2016 earnings are

expected to be around $1.4 billion as weakness continues.

Despite weakness in the industry, Deere & Company remains a safe long-term investment. The

company pays out about $800 million a year in dividends. Even during industry lows, the company

expects to make around $1.4 billion in profits in 2016 for a dividend payout ratio of 57%.

Next Dividend Record Date: Late March, 2016 Next Earnings Release: Late February, 2016


Deere & Company’s competitive advantage comes from its brand recognition and reputation for quality

in the farming machinery industry. Deere & Company’s competitive advantage has given it a 60%

market share of the farming equipment industry in the US and Canada.

Recessions and falling grain prices hamper Deere & Company’s earnings. The company saw EPS fall

from a high of $4.70 in 2008 to a low of $2.82 during the depths of the Great Recession in 2009. Deere

& Company’s earnings are cyclical and depend upon grain prices. Farmers hold off on large capital

investments when their cash flows diminish due to low grain prices.


Deere & Company has averaged earnings-per-share growth of 12.8% a year from earnings lows in

2009 to earnings lows in 2015. Peak-to-peak (2008 to 2013) earnings-per-share grew at 14.1% a year

for the company. When grain prices rise, Deere & Company will see its earnings surge. I expect the

company to continue to deliver 10%+ (likely closer to 13%) EPS growth over full economic cycles.

This growth combined with the company’s current ~3% dividend yield gives Deere & Company

investors expected total returns of 13%+.

Deere & Company is deeply undervalued. The company’s average dividend yield over the last decade

is 2%. The company is currently yielding 3.1%. Based on its average dividend yield, Deere &

Company’s fair value is around $117 a share. The stock is currently trading for $78.42 a share.

Maximum Drawdown (starting in year 2000): -73% in March of 2009



10 Year EPS Growth Rate: 12.8% (used trough-to-trough growth)


Most Recent Dividend Increase: No Increase in last 12 months


17

Becton, Dickinson & Company (BDX)


BDX is a global producer of medical, diagnostic, and bioscience products. The company was founded

in 1897 and now has a market cap of $28.7 billion.

BDX saw earnings-per-share grow 28% in its most recent quarter (2/3/16) as the company continues to

realize cost synergies from its CareFusion acquisition. BDX also released its full year 2016 outlook.

The company is expecting robust EPS growth of around 17% in fiscal 2016 resulting from organic

business growth and margin improvements from cost synergies related to the CareFusion acquisition.

Next Dividend Record Date: March 3rd, 2016 Next Earnings Release: Early May, 2016


BDX’ competitive advantage comes from its global reach, strong supply lines, and well established

relationships with customers and governments. New entrants to the medical supplies industry would

find it costly and difficult to recreate BDX’s global supply chain and relationships with customers.

BDX operates in the health care industry which has traditionally done well through recessions. BDX

grew revenue, earnings, and dividends from 2007 through 2009, throughout the Great Recession. The

company is only minimally affected by economic downturns.


BDX’s long-term growth potential comes from rising health care spending as a percentage of GDP

across the globe coupled with population growth in emerging markets. BDX currently generates

approximately 20% of its revenues in emerging markets – this number will likely rise over time.

Over the last decade, BDX has compounded earnings-per-share at around 9.7% per year. I expect an

earnings-per-share growth rate of 9% to 11% a year over the next decade as the company benefits from

cost reductions, margin improvements, and scale advantages from its CareFusion acquisition. This

growth combined with the company’s current 2% dividend yield gives investors expected total returns

of 11% to 13% a year going forward.

BDX has a PE ratio of 17.9. During bull markets, BDX’s P/E ratio has averaged around 19. The

company is likely trading at or slightly below fair value at current prices. Returns will come from

company growth and dividends, not from large valuation multiple change gains.

Maximum Drawdown (starting in year 2000): -35% in July of 2002

DRIP Available: Yes





Dividend History: 43 years of consecutive dividend increases

19

Wal-Mart (WMT)


If Wal-Mart were a country (assuming revenue is about equal to GDP), it would be the 28th largest in

the world based on its annual revenue of $484 billion.

Wal-Mart released its 3rd quarter results on November 17th. Constant currency revenue grew 2.8% for

the company. Comparable store sales in United States Wal-Mart stores grew 1.5%, the 5th consecutive

quarter of increases. Operating income declined 8.8% versus the same quarter a year ago due to wages

hikes and investments in digital sales.

The company announced (1/15/16) it is closing 269 stores globally which account for less than 1% of

total company revenue. The company is closing its small express stores and unprofitable stores in

Latin America and the United States.

Next Dividend Record Date: Mid March, 2016 Next Earnings Release: Late February, 2016


Wal-Mart’s competitive advantage comes from its scale and operating efficiency. Its size allows it to

command the best prices from its suppliers. The company pressures suppliers to lower their prices and

then passes savings on to consumers, resulting in a positive feedback loop.

The Great Recession of 2007 to 2009 did not impede operations. Wal-Mart grew revenue, earnings,

and dividends each year through the recession. Wal-Mart is among the most ‘recession-proof’ publicly

traded businesses. When the S&P 500 fell 38% in 2008, Wal-Mart gained 18%.


Wal-Mart’s growth will be sluggish (or possibly negative) in the short-term as the company invests

heavily in the future. The company’s long-term competitive advantage (scale-based low prices) will

continue to provide sales and earnings growth over the long run.

Investors should expect total returns of 8.3% to 10.3% a year from Wal-Mart. Total returns will come

from: 3% to 4% sales growth a year, 2% to 3% share repurchases a year, and a dividend yield of 2.9%.

Wal-Mart is currently trading for an adjusted P/E ratio of 14.1. The company’s P/E ratio has averaged

about 15.0 over the last decade. Additionally, the company’s shares are trading near all time dividend

yield highs. Based on its historical dividend yield and price-to-earnings ratio, fair value for Wal-Mart

shares is likely between $70 and $80. The stock is currently trading for $67 per share.

Maximum Drawdown (starting in year 2000): -37% in October of 2000 (hit 36% in November 2015)






Dividend History: 42 Consecutive years of dividend increase

21

Verizon (VZ)


Verizon is the largest wireless carrier in the United States based on its ~44% market share. Verizon is

the 16th largest corporation (based on market cap of $207 billion) publicly traded in the United States.

Verizon posted favorable full year results (1/21/16). The company saw adjusted earnings-per-share

grow 19.1% in 2015 versus 2014. For the year, EBITDA margins grew 1.3 percentage points to 35.4%

and revenue grew 2.6%. Rising margins combined with rising revenue shows that Verizon’s

competitive advantage is strengthening.

Next Dividend Record Date: Early April, 2016 Next Earnings Release: Late April, 2016


Verizon and AT&T together control over 80% of the wireless market in the United States. The

telecommunications market has high barriers to entry which inhibit competition due to the large up-

front costs of building a network. Additionally, spectrum auctions prohibit competition. Verizon spent

$10 billion in the latest spectrum auction (which raised $44 billion total for the US government).

Verizon performs well during recessions. The company’s wireless network provides a vital service that

its customers (in general) do not cut back on – even during difficult economic times. Verizon does

carry a large debt load of around $1.1 billion, but its consistent stable cash flows make the company’s

large debt burden sustainable.


I expect Verizon to generate earnings-per-share growth of around 6% a year going forward. The

company’s wireless service business continues to grow organically. Verizon recently acquired AOL to

build a digital and video growth platform centered on mobile users which will be monetized through

advertising. Verizon offers investors total returns of around 10.4% a year from its large dividend yield

of 4.4% and expected 6% earnings-per-share growth rates.

Verizon is currently trading for a price-to-earnings ratio of just 12.8. The company’s average price-to-

earnings ratio over the last decade is 14.6. Verizon shares are currently trading for ~$51 a share.

Based on its historical average price-to-earnings ratio and current earnings-per-share, Verizon stock

should be trading for around $58 a share.

Maximum Drawdown (starting in year 2000): -55% in July of 2002 DRIP Available: Yes, with fees


10 Year EPS Growth Rate: 5.0%




23

W.W. Grainger


W.W Grainger is the market leader in the United States maintenance, repair, and operations

(abbreviated MRO) supply industry. The company was founded in 1927 and now generates revenues

of more than $10 billion a year.

W.W. Grainger released full year 2015 results on January 26th. The company saw adjusted earnings-

per-share decline 3% on the year due to the following (by affecting W.W. Grainger’s customer base):

Strong United States dollar, and oil and gas price declines. The company’s competitive advantage and

market position remains intact, however. The company’s 2016 earnings guidance is not particularly

helpful – management is estimating EPS growth of between -9.5% and 8.9% in fiscal 2016

Next Dividend Record Date: February 8th, 2016 Next Earnings Release: April 18th, 2016


W.W. Grainger’s competitive advantage comes from its excellent supply chain. The company is the

largest company in the fragmented North America MRO. As a result, W.W. Grainger is able to realize

economies of scale in its operations – a distinct advantage the company has over its smaller

competitors.

W.W Grainger performed well during the Great Recession of 2007 to 2009. The company’s earnings-

per-share fell 14% in 2009 during the worst of the recession but quickly recovered to new all-time

highs the following year. I expect a similar recover from current earnings-per-share declines.


W.W. Grainger has compounded EPS at 12.6% a year over the last decade. The company has grown

dividends at 17.1% a year over the same time period.

W.W. Grainger is expecting 7% to 12% revenue growth over the next 5 years. The company will

accomplish this by growing e-commerce operations in Japan, Western Europe, North America, and

Great Britain. The company also plans to repurchase ~$1.5 billion in shares over the next 2 years –

which comes to ~5.5% share count reductions a year.

From 2012 through 2014 W.W. Grainger had an average price-to-earnings ratio above 20. The

company currently has an adjusted price-to-earnings ratio of 17.6. Given its excellent growth potential

and shareholder friendly management, the company should have a price-to-earnings ratio of at least 20.

This implies a fair value of $243 or more. W.W. Grainger stock is currently trading for around $208.

Maximum Drawdown (starting in year 2000): -56% in October of 2000

DRIP Available: Not at this time






25

Analysis of International Stocks

Only 1 international stock currently ranks in the top 10 using The 8 Rules of Dividend Investing. International stocks are removed from the top

10 list above to simplify investing for U.S. based investors.

Weir Group is the only international stock to rank in the Top 10. It would rank #1 overall (ahead of Archer-Daniels-Midland) if it were

included in the normal Top 10.

Weir Group is based in the United Kingdom. The United Kingdom does not impose a dividend withholding tax on United States investors.

This makes holding Weir Group as beneficial as any other United States traded stock.

Weir Group is an industrial equipment manufacturer serving the oil & gas, mineral, power, and industrial industries. The company has paid

increasing dividends for 25 consecutive years. The company is the global leader in slurry handling and pressure pumping equipment.

Weir Group’s most relevant stats are listed out below:

Name Ticker (Foreign) Growth Rate Dividend Yield P/E Ratio Rank (If in Top 10)

Weir Group LON:WEIR 12.5% 5.0% 7.4 1 (before CMI)

It is rare that a corporation with double-digit historical earnings-per-share growth trades for a price-to-earnings ratio under 10. That is the case

with Weir Group at current prices. The company’s earnings-per-share are expected to decline approximately 33% on the next quarterly

announcement. Even with these declines, Weir Group will still have a low P/E ratio of around 11.

The company’s payout ratio will likely be around 45% after the company’s expected earnings decline when it reports full year 2015 results.

Weir Group’s dividend is currently safe despite the downturn in mineral and oil gas industries which the company serves.

26

List of Stocks by Sector

Each of the 180 stocks with 25 or more years of dividend payments without a reduction is sorted by

sector below. Stocks are listed in order based on The 8 Rules of Dividend Investing, with the

highest ranked first. Dividend yield is included next to each stock’s ticker symbol.

Basic Materials 1. Phillips 66 (PSX) - 2.9%

2. Valspar Corp. (VAL) - 1.7%

3. PPG Industries Inc. (PPG) - 1.6%

4. Enbridge, Inc. (ENB) - 3.8%

5. Helmerich & Payne Inc. (HP) - 5.5%

6. Sherwin-Williams Co. (SHW) - 1%

7. Phillips 66 Partners LP (PSXP) - 3.1%

8. Air Products & Chem. (APD) - 2.4%

9. RPM International Inc. (RPM) - 2.8%

10. BHP Billiton (BBL) - 12.1%

11. ExxonMobil Corp. (XOM) - 3.6%

12. Chevron Corp. (CVX) - 5.2%

13. NACCO Industries (NC) - 2.3%

14. H.B. Fuller Company (FUL) - 1.4%

15. National Fuel Gas (NFG) - 3.5%

16. Imperial Oil (IMO) - 1.3%

17. Energen Corp. (EGN) - 0.3%

18. Air Liquide (AI.E) - 2.7%

19. Nucor Corp. (NUE) - 3.8%

20. Murphy Oil (MUR) - 7.1%

Technology 1. Verizon Wireless (VZ) - 4.4%

2. Computer Services Inc. (CSVI) - 2.7%

3. BCE, Inc. (BCE) - 5.3%

4. AT&T Inc. (T) - 5.2%

5. Automatic Data Proc. (ADP) - 2.6%

6. Telephone & Data Sys. (TDS) - 2.3%

7. Brady Corp. (BRC) - 3.8%

8. Diebold Inc. (DBD) - 4.3%

9. Vodafone Group plc (VOD) - 5.8%

Financial 1. Munich Re (MUV2.B) - 4.5%

2. Franklin Resources (BEN) - 2.1%

3. Waddell & Reed (WDR) - 8.3%

4. Eagle Financial Services (EFSI) - 3.5%

5. AFLAC Inc. (AFL) - 2.8%

6. Eaton Vance Corp. (EV) - 3.7%

7. McGraw Hill Financial Inc. (MHFI) - 1.5%

8. American Express (AXP) - 2.1%

9. T. Rowe Price Group (TROW) - 3%

10. Tompkins Financial Corp. (TMP) - 3.4%

11. Farmers & Merchants Ban. (FMCB) - 2.4%

12. Cincinnati Financial (CINF) - 3.1%

13. Torchmark Insurance (TMK) - 1%

14. Harleysville Savings (HARL) - 4.5%

15. HCP Inc. (HCP) - 6.3%

16. Community Trust Banc. (CTBI) - 3.8%

17. M&T Bank Corporation (MTB) - 2.6%

18. Commerce Bancshares (CBSH) - 2.2%

19. Old Republic International (ORI) - 4.2%

20. 1st Source Corp. (SRCE) - 2.5%

21. First Financial Bankshares (FFIN) - 2.5%

22. First Financial Corp. (THFF) - 3.1%

23. Arthur J Gallagher (AJG) - 3.9%

24. Universal Health Realty Trust (UHT) - 5.2%

25. RLI Corp. (RLI) - 1.3%

26. Northern Trust (NTRS) - 2.4%

27. Realty Income (O) - 4.3%

28. National Retail Properties (NNN) - 4%

29. United Bankshares Inc. (UBSI) - 3.9%

30. Public Storage (PSA) - 2.9%

31. Mercury General Corp. (MCY) - 5.4%

32. Federal Realty Inv. Trust (FRT) - 2.5%

27

Consumer Goods 1. Archer Daniels Midland (ADM) - 3.5%

2. Johnson Controls (JCI) - 3.2%

3. General Mills (GIS) - 3.2%

4. Flowers Foods (FLO) - 2.9%

5. Diageo plc (DEO) - 4.1%

6. Procter & Gamble Co. (PG) - 3.3%

7. Church & Dwight (CHD) - 1.5%

8. Coca-Cola Company (KO) - 3.1%

9. VF Corp. (VFC) - 2.5%

10. Altria Group Inc. (MO) - 3.8%

11. Carlisle Companies (CSL) - 1.4%

12. PepsiCo Inc. (PEP) - 2.9%

13. Philip Morris (PM) - 4.6%

14. Mondelez (MDLZ) - 1.8%

15. Ecolab, Inc. (ECL) - 1.3%

16. Kerry Group (KYGA.L) - 0.5%

17. Home Depot (HD) - 2%

18. Hormel Foods Corp. (HRL) - 1.5%

19. Nike (NKE) - 1.1%

20. Kellogg (K) - 2.8%

21. The J.M. Smucker Co. (SJM) - 2.1%

22. Universal Corp. (UVV) - 3.9%

23. McCormick & Co. (MKC) - 2%

24. PZ Cussons plc (PZC.L) - 2.9%

25. Nestle (NESN.V) - 3%

26. Colgate-Palmolive Co. (CL) - 2.3%

27. Brown-Forman Class B (BF-B) - 1.5%

28. Kimberly-Clark Corp. (KMB) - 2.7%

29. Clorox Company (CLX) - 2.5%

30. Cranswick plc (CWK.L) - 1.8%

31. Young & Co's Brewery (YNGA.L) - 1.5%

32. Sonoco Products Co. (SON) - 3.5%

33. Lowe's Companies (LOW) - 1.7%

34. Bemis Company (BMS) - 2.3%

35. Stepan Company (SCL) - 1.7%

36. Unilever (UL) - 3%

37. Leggett & Platt Inc. (LEG) - 3.1%

38. Hershey (HSY) - 2.7%

39. Weyco Group Inc. (WEYS) - 3.3%

40. Lancaster Colony Corp. (LANC) - 2.1%

41. HNI Corp (HNI) - 3.4%

42. L'Oreal (OR.E) - 1.8%

43. Tootsie Roll Industries (TR) - 1.2%

44. Kraft-Heinz Company (KHC) - 3.2%

45. Henkel (HEN3.E) - 1.4%

Utilities 1. Fortis (FTS.TO) - 3.6%

2. Canadian Utilities (CU.TO) - 3.3%

3. Consolidated Edison (ED) - 3.7%

4. Southern Company (SO) - 4.5%

5. California Water Service (CWT) - 2.8%

6. SCANA Corp. (SCG) - 3.4%

7. Northwest Natural Gas (NWN) - 3.6%

8. UGI Corp. (UGI) - 2.5%

9. Vectren Corp. (VVC) - 3.6%

10. Black Hills Corp. (BKH) - 3.2%

11. American States Water (AWR) - 2%

12. Questar Corp. (STR) - 3.4%

13. Conn. Water Service (CTWS) - 2.6%

14. WGL Holdings Inc. (WGL) - 2.8%

15. Middlesex Water Co. (MSEX) - 2.9%

16. Atmos Energy (ATO) - 2.4%

17. MGE Energy (MGEE) - 2.4%

18. Otter Tail (OTTR) - 4.3%

19. Piedmont Natural Gas (PNY) - 2.2%

20. SJW Corp. (SJW) - 2.4%

28

Industrial Goods 1. Weir Group plc (WEIR.L) - 5%

2. Cummins (CMI) - 3.9%

3. United Technologies (UTX) - 2.9%

4. Deere & Co. (DE) - 3.1%

5. Pentair Ltd. (PNR) - 2.9%

6. Parker-Hannifin Corp. (PH) - 2.5%

7. Emerson Electric (EMR) - 4.1%

8. Caterpillar (CAT) - 4.7%

9. 3M Company (MMM) - 2.7%

10. Illinois Tool Works (ITW) - 2.4%

11. Nordson Corp. (NDSN) - 1.6%

12. Spirax-Sarco Engineering (SPX.L) - 2.3%

13. Eaton (ETN) - 4%

14. Stanley Black & Decker (SWK) - 2.4%

15. General Dynamics (GD) - 2.1%

16. Tennant Company (TNC) - 1.5%

17. Clarcor Inc. (CLC) - 1.9%

18. Dover Corp. (DOV) - 2.8%

19. Cobham plc (COB.L) - 4.6%

20. Spectris Group plc (SXS.L) - 2.3%

21. Donaldson Company (DCI) - 2.3%

22. Rotork plc (ROR.L) - 0.3%

23. Gorman-Rupp Company (GRC) - 1.8%

24. Raven Industries (RAVN) - 3.5%

Services 1. Wal-Mart Stores Inc. (WMT) - 2.9%

2. W.W. Grainger Inc. (GWW) - 2.2%

3. Disney (DIS) - 1.5%

4. Walgreens Boots Alliance (WBA) - 1.9%

5. Target Corp. (TGT) - 3.2%

6. Genuine Parts Co. (GPC) - 2.9%

7. Empire Co. (EMP.A.TO) - 1.6%

8. United Parcel Service (UPS) - 3.1%

9. Cardinal Health (CAH) - 2%

10. McDonald's Corp. (MCD) - 3.1%

11. RR Donnelley (RRD) - 7.7%

12. Sysco Corp. (SYY) - 2.9%

13. ABM Industries Inc. (ABM) - 2.3%

14. Mine Safety Appliances (MSA) - 3.1%

15. Cintas Corp. (CTAS) - 1.3%

16. Wolters Kluwer NV (WKL.A) - 2.4%

17. Bowl America (BWL.A) - 4.7%

Health Care 1. Abbott Laboratories (ABT) - 2.8%

2. Becton Dickinson & Co. (BDX) - 2%

3. AbbVie (ABBV) - 4.3%

4. Johnson & Johnson (JNJ) - 3%

5. C.R. Bard Inc. (BCR) - 0.5%

6. Medtronic Inc. (MDT) - 2%

7. United Health Group (UNH) - 1.8%

8. Novo Nordisk (NVO) - 1.5%

9. Merck & Co. (MRK) - 3.7%

10. Baxalta (BXLT) - 0.7%

11. Baxter International (BAX) - 1.2%

12. Roche (ROG.V) - 3.2%

13. Eli Lilly & Company (LLY) - 2.7%

29

This information is not personalized advice. It is for informational purposes only. Please see disclaimer at end of newsletter for more.

List of Stocks by Rank

Each of the 180 stocks with 25 or more years of dividend payments without a reduction is

listed below. Stocks are listed in order based on The 8 Rules of Dividend Investing, with the

highest ranked first. The ‘Score’ of each stock is listed as well. The top ranked stock has a

score of 1. The closer to 1, the better.

1. Weir Group plc (WEIR.L) – 1.00

2. Archer-Daniels-Midl. (ADM) - 0.99

3. Johnson Controls (JCI) - 0.98

4. Cummins (CMI) - 0.97

5. United Technologies (UTX) - 0.95

6. Abbott Laboratories (ABT) - 0.96

7. Deere & Co. (DE) - 0.95

8. Becton Dickinson (BDX) - 0.93

9. Wal-Mart Stores Inc. (WMT) - 0.94

10. Verizon Wireless (VZ) - 0.91

11. W.W. Grainger Inc. (GWW) - 0.91

12. General Mills (GIS) - 0.90

13. Pentair Ltd. (PNR) - 0.89

14. Munich Re (MUV2.B) - 0.88

15. AbbVie (ABBV) - 0.87

16. Disney (DIS) - 0.87

17. Phillips 66 (PSX) - 0.87

18. Flowers Foods (FLO) - 0.85

19. Fortis (FTS.TO) - 0.84

20. Johnson & Johnson (JNJ) - 0.83

21. Valspar Corp. (VAL) - 0.83

22. Diageo plc (DEO) - 0.82

23. Franklin Resources (BEN) - 0.82

24. Parker-Hannifin Corp. (PH) - 0.81

25. PPG Industries Inc. (PPG) - 0.81

26. Canadian Utilities (CU.TO) - 0.81

27. Waddell & Reed (WDR) - 0.81

28. Emerson Electric (EMR) - 0.81

29. Walgreens Boots Allia. (WBA) - 0.80

30. Caterpillar (CAT) - 0.79

31. Procter & Gamble Co. (PG) - 0.79

32. Computer Services Inc. (CSVI) - 0.79

33. C.R. Bard Inc. (BCR) - 0.78

34. Church & Dwight (CHD) - 0.78

35. Coca-Cola Company (KO) - 0.78

36. BCE, Inc. (BCE) - 0.77

37. VF Corp. (VFC) - 0.77

38. Target Corp. (TGT) - 0.76

39. AT&T Inc. (T) - 0.75

40. Altria Group Inc. (MO) - 0.75

41. Carlisle Companies (CSL) - 0.75

42. Eagle Financial Services (EFSI) - 0.75

43. Medtronic Inc. (MDT) - 0.74

44. PepsiCo Inc. (PEP) - 0.74

45. Enbridge, Inc. (ENB) - 0.74

46. Philip Morris (PM) - 0.73

47. United Health Group (UNH) - 0.73

48. Mondelez (MDLZ) - 0.71

49. Ecolab, Inc. (ECL) - 0.71

50. 3M Company (MMM) - 0.71

51. AFLAC Inc. (AFL) - 0.71

52. Illinois Tool Works (ITW) - 0.70

53. Helmerich & Payne Inc. (HP) - 0.70

54. Nordson Corp. (NDSN) - 0.70

55. Eaton Vance Corp. (EV) - 0.70

56. Spirax-Sarco Enginee. (SPX.L) - 0.69

57. Novo Nordisk (NVO) - 0.69

58. Eaton (ETN) - 0.69

59. Genuine Parts Co. (GPC) - 0.69

60. Kerry Group (KYGA.L) - 0.68

61. Home Depot (HD) - 0.68

62. Stanley Black & Deck. (SWK) - 0.68

63. Hormel Foods Corp. (HRL) - 0.66

64. General Dynamics (GD) - 0.66

65. Empire Co. (EMP.A.TO) - 0.64

66. Nike (NKE) - 0.64

30


67. Sherwin-Williams Co. (SHW) - 0.63

68. McGraw Hill Financial (MHFI) - 0.63

69. American Express (AXP) - 0.61

70. United Parcel Service (UPS) - 0.61

71. Cardinal Health (CAH) - 0.61

72. Tennant Company (TNC) - 0.61

73. Consolidated Edison (ED) - 0.61

74. Clarcor Inc. (CLC) - 0.60

75. Dover Corp. (DOV) - 0.59

76. T. Rowe Price Group (TROW) - 0.59

77. Merck & Co. (MRK) - 0.59

78. Tompkins Financial (TMP) - 0.59

79. Kellogg (K) - 0.59

80. Farmers & Merchants (FMCB) - 0.59

81. Cincinnati Financial (CINF) - 0.58

82. The J.M. Smucker Co. (SJM) - 0.57

83. Southern Company (SO) - 0.57

84. California Water Servi. (CWT) - 0.56

85. Phillips 66 Partners LP (PSXP) - 0.56

86. Universal Corp. (UVV) - 0.56

87. McCormick & Co. (MKC) - 0.54

88. Baxalta (BXLT) - 0.54

89. Torchmark Insurance (TMK) - 0.53

90. PZ Cussons plc (PZC.L) - 0.53

91. McDonald's Corp. (MCD) - 0.53

92. Harleysville Savings (HARL) - 0.53

93. Cobham plc (COB.L) - 0.52

94. SCANA Corp. (SCG) - 0.52

95. RR Donnelley (RRD) - 0.51

96. Spectris Group plc (SXS.L) - 0.51

97. Northwest Natural Gas (NWN) - 0.50

98. Nestle (NESN.V) - 0.50

99. HCP Inc. (HCP) - 0.50

100. Air Products & Chem. (APD) - 0.50

101. Community Trust Ban. (CTBI) - 0.46

102. RPM International Inc. (RPM) - 0.46

103. M&T Bank Corporation (MTB) - 0.45

104. Colgate-Palmolive Co. (CL) - 0.44

105. Sysco Corp. (SYY) - 0.43

106. Brown-Forman Class B (BF-B) - 0.43

107. Baxter International (BAX) - 0.42

108. Kimberly-Clark Corp. (KMB) - 0.42

109. Commerce Bancshares (CBSH) - 0.42

110. Clorox Company (CLX) - 0.41

111. BHP Billiton (BBL) - 0.4

112. UGI Corp. (UGI) - 0.4

113. ExxonMobil Corp. (XOM) - 0.4

114. Cranswick plc (CWK.L) - 0.39

115. ABM Industries Inc. (ABM) - 0.39

116. Mine Safety Appliances (MSA) - 0.39

117. Young & Co's Bre. (YNGA.L) - 0.38

118. Roche (ROG.V) - 0.38

119. Sonoco Products Co. (SON) - 0.36

120. Old Republic Internati. (ORI) - 0.36

121. Donaldson Company (DCI) - 0.36

122. Lowe's Companies (LOW) - 0.35

123. Vectren Corp. (VVC) - 0.35

124. Chevron Corp. (CVX) - 0.34

125. 1st Source Corp. (SRCE) - 0.33

126. Black Hills Corp. (BKH) - 0.33

127. First Financial Banksh. (FFIN) - 0.33

128. Cintas Corp. (CTAS) - 0.32

129. Bemis Company (BMS) - 0.32

130. Stepan Company (SCL) - 0.32

131. Automatic Data Proc. (ADP) - 0.31

132. Unilever (UL) - 0.31

133. Rotork plc (ROR.L) - 0.31

134. First Financial Corp. (THFF) - 0.31

135. Eli Lilly & Company (LLY) - 0.31

136. Leggett & Platt Inc. (LEG) - 0.31

137. Hershey (HSY) - 0.29

138. Telephone & Data Sys. (TDS) - 0.29

139. NACCO Industries (NC) - 0.29

140. Weyco Group Inc. (WEYS) - 0.29

141. American States Water (AWR) - 0.28

142. H.B. Fuller Company (FUL) - 0.27

143. Questar Corp. (STR) - 0.27

144. Conn. Water Service (CTWS) - 0.27

145. Lancaster Colony (LANC) - 0.26

146. National Fuel Gas (NFG) - 0.26

147. Arthur J Gallagher (AJG) - 0.25

148. HNI Corp (HNI) - 0.24

31


149. Universal Health Realty (UHT) - 0.24

150. Brady Corp. (BRC) - 0.22

151. WGL Holdings Inc. (WGL) - 0.21

152. RLI Corp. (RLI) - 0.21

153. Middlesex Water Co. (MSEX) - 0.20

154. L'Oreal (OR.E) - 0.20

155. Tootsie Roll Industries (TR) - 0.20

156. Wolters Kluwer NV (WKL.A) - 0.20

157. Northern Trust (NTRS) - 0.19

158. Realty Income (O) - 0.19

159. Kraft-Heinz Company (KHC) - 0.18

160. Diebold Inc. (DBD) - 0.18

161. Atmos Energy (ATO) - 0.18

162. National Retail Propert. (NNN) - 0.16

163. Vodafone Group plc (VOD) - 0.15

164. MGE Energy (MGEE) - 0.15

165. Otter Tail (OTTR) - 0.15

166. Imperial Oil (IMO) - 0.14

167. Energen Corp. (EGN) - 0.14

168. Air Liquide (AI.E) - 0.14

169. Henkel (HEN3.E) - 0.13

170. United Bankshares Inc. (UBSI) - 0.12

171. Bowl America (BWL.A) - 0.10

172. Public Storage (PSA) - 0.10

173. Mercury General Corp. (MCY) - 0.08

174. Nucor Corp. (NUE) - 0.07

175. Gorman-Rupp Comp. (GRC) - 0.06

176. Piedmont Natural Gas (PNY) - 0.05

177. SJW Corp. (SJW) - 0.04

178. Federal Realty Inv. Trust (FRT) - 0.02

179. Raven Industries (RAVN) - 0.02

180. Murphy Oil (MUR) - 0.02

32


Portfolio Building Guide

The process of building a high quality dividend growth portfolio is not complicated:

Each month invest in the top ranked stock in which you own the smallest dollar amount.

Over time, you will build a well-diversified portfolio of great businesses purchased at

attractive prices.

Examples

Portfolio 1 Portfolio 2

Ticker Name Amount Ticker Name Amount

ADM Archer Daniels Midland $ 1,002 ADM Archer Daniels Midland $ 4,374

JCI Johnson Controls $ - JCI Johnson Controls $ 4,878

CMI Cummins $ - CMI Cummins $ 4,353

UTX United Technologies $ - UTX United Technologies $ 2,952

ABT Abbott Laboratories $ - ABT Abbott Laboratories $ 3,309

DE Deere & Co. $ - DE Deere & Co. $ 4,864

BDX Becton Dickinson & Co. $ - BDX Becton Dickinson & Co. $ 6,660

WMT Wal-Mart Stores Inc. $ - WMT Wal-Mart Stores Inc. $ 2,367

VZ Verizon Wireless $ - VZ Verizon Wireless $ 2,818

GWW W.W. Grainger Inc. $ - GWW W.W. Grainger Inc. $ 6,243

- If you had portfolio 1, you would buy JCI, the top ranked stock you own least.

- If you had portfolio 2, you would buy WMT, the top ranked stock you own least.

If you have an existing portfolio or a large lump sum to invest, switch over to the Sure

Dividend strategy over a period of 20 months. Each month, take 1/20 of your initial

portfolio value, and buy the top ranked stock you own the least (as per the examples

above).

When you sell a stock, use the proceeds to purchase the top ranked stock you own the

least. Reinvest dividends in the same manner.

This simple investing process will build a diversified portfolio of high quality dividend

stocks over a period of less than 2 years. Further, higher ranked stocks will receive

proportionately more investment dollars as they will stay on the rankings longer. You

will build up large positions in the highest quality stocks over your investing career.

Alternatively, the top 10 list is also useful as an idea generation tool for those with a

different portfolio allocation plan.

33


List of Past Recommendations

The stocks below are all of the previous recommendations of Sure Dividend that are

no longer in the top 10 using The 8 Rules of Dividend Investing. The date each stock

was first recommended is also shown below.

Name Current Rank Status 1st Rec. Date Sell Date Clorox (CLX) 110 Hold April 2014 N/A

Target (TGT) 38 Hold April 2014 N/A

Kimb.-Clark (KMB) 108 Hold April 2014 N/A

ExxonMobil (XOM) 113 Hold April 2014 N/A

AFLAC (AFL) 51 Hold April 2014 N/A

PepsiCo (PEP) 44 Hold April 2014 N/A

McDonald’s (MCD) 91 Hold April 2014 N/A

Coca-Cola (KO) 35 Hold April 2014 N/A

Genuine Parts (GPC) 59 Hold May 2014 N/A

3M (MMM) 50 Hold May 2014 N/A

AT&T (T) 39 Hold June 2014 N/A

Philip Morris (PM) 46 Hold June 2014 N/A

General Mills (GIS) 12 Hold June 2014 N/A

J.M. Smucker (SJM) 82 Hold August 2014 N/A

EcoLab (ECL) 49 Hold October 2014 N/A

Kellogg (K) 79 Hold December 2014 N/A

Helmerich & Payne (HP) 53 Hold February 2015 N/A

Altria (MO) 40 Hold April 2015 N/A

BCE, Inc. (BCE) 36 Hold August 2015 N/A

Caterpillar (CAT) 30 Hold August 2015 N/A

Eaton (ETN) 58 Hold September 2015 N/A

Johnson & Johnson (JNJ) 20 Hold November 2015 N/A

Computer Servic, (CSVI) 32 Hold November 2015 N/A

Procter & Gamble (PG) 31 Hold December 2015 N/A

Chubb (CB) N/A Sold April 2014 July 2015

Baxalta (BXLT) N/A Sell July 2015 Feb. 2016

ConocoPhillips (COP) N/A To Be Sold December 2014 On Oil Rise

34

Disclaimer Nothing presented herein is, or is intended to constitute, specific investment advice. Nothing in this newsletter should be construed as a

recommendation to follow any investment strategy or allocation. Any forward looking statements or forecasts are based on assumptions and

actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. While Sure Dividend has used reasonable efforts to obtain information from reliable sources, we make no

representations or warranties as to the accuracy, reliability or completeness of third-party information presented herein. No guarantee of

investment performance is being provided and no inference to the contrary should be made. There is a risk of loss from an investment in

securities. Past performance is not a guarantee of future performance.

Closing Thoughts

The global economy is struggling, as is the S&P 500. There is a good chance we

are already in the beginning of another recession.

Recessions have occurred in the past, and they will continue to occur in the future.

Great businesses do not stop being great because a recession occurs.

Earnings may temporarily fall (but don’t in many cases). This doesn’t mean the

long-term growth prospects of a business cease being positive because of a

temporary recession.

The ‘sky is falling’ mentality of markets in general make people believe that this

recession will somehow be different, and that the start, length, and magnitude of

the recession can be predicted. They can’t be predicted, and future recessions will

be like past recessions in one way; they will end.

Investors who panic sell hurt their own returns while giving patient investors great

deals.

“The stock market is designed to transfer money from the active to the patient”

- Warren Buffett

Be patient. Don’t try to time the market. Use recessions (whenever they occur) to

your advantage by buying shares of undervalued businesses.

Thanks,

Ben Reynolds

Sure Dividend

If you have any questions or comments, please email me at [email protected]

The next newsletter publishes on Sunday March 6th, 2016

sure dividend€¦ · february 2016 edition by ben reynolds . 2 table of contents ... innovations...

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